SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM 10-Q
Quarterly Report under Section 13 or 15(d) of
The Securities Exchange Act of 1934
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For Quarter Ended June 30, 1996 Commission file no. 0-10546
LAWSON PRODUCTS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 36-2229304
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1666 East Touhy Avenue, Des Plaines, Illinois 60018
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(Address of principal executive offices) (Zip Code)
Registrant's telephone no., including area code: (847) 827-9666
Not applicable
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Former name, former address and former fiscal year, if changed
since last report.
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
11,600,614 Shares, $1 par value, as of July 23, 1996.
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<TABLE>
LAWSON PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
(Amounts in thousands) 1996 1995
<CAPTION> ------------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
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Current Assets:
Cash and cash equivalents $ 10,242 $ 10,432
Marketable securities 10,969 16,068
Accounts receivable, less
allowance for doubtful accounts 32,011 28,296
Inventories (Note B) 37,277 27,083
Miscellaneous receivables and
prepaid expenses5,4225,635
Deferred income taxes 625 464
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Total Current Assets 96,546 87,978
Marketable securities 13,406 20,847
Property, plant and equipment, less
allowances for depreciation and
amortization 39,495 35,501
Investments in real estate 3,202 3,152
Deferred income taxes 3,508 3,201
Other assets 10,751 9,935
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Total Assets $166,908 $160,614
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</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
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<S> <C> <C>
Current Liabilities:
Accounts payable $ 5,283 $ 3,219
Accrued expenses and other liabilities 13,482 14,329
Income taxes 1,144 962
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Total Current Liabilities 19,909 18,510
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Accrued liability under security
bonus plans 12,081 11,422
Other 8,564 7,871
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20,645 19,293
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Stockholders' Equity:
Preferred Stock, $1 par value:
Authorized - 500,000 shares
Issued and outstanding - None --- ---
Common Stock, $1 par value:
Authorized - 35,000,000 shares
Issued - (1996 - 11,600,614 shares;
1995 - 11,686,614 shares) 11,601 11,687
Capital in excess of par value 490 494
Retained earnings 115,053 111,321
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127,144 123,502
Other (790) (691)
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Total Stockholders' Equity 126,354 122,811
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Total Liabilities and Stockholders'
Equity $166,908 $160,614
==========================
<FN>
See notes to condensed consolidated financial statements.
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</TABLE>
<PAGE>
<TABLE>
LAWSON PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(Amounts in thousands, except per share data)
<CAPTION>
For the For the
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Sales $ 63,479 $ 56,095 $119,587 $110,940
Investment and other income 419 515 1,050 1,541
--------- --------- --------- ---------
63,898 56,610 120,637 112,481
--------- --------- --------- ---------
Cost of goods sold (Note B) 20,752 15,822 37,430 31,243
Selling, general and
administrative expenses35,042 32,306 68,314 64,517
--------- --------- --------- ---------
55,794 48,128 105,744 95,760
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Income before income taxes 8,104 8,482 14,893 16,721
Provision for income taxes 3,375 3,205 6,140 6,419
--------- --------- --------- ---------
Net income $ 4,729 $ 5,277 $ 8,753 $ 10,302
========= ========= ========= =========
Net income per share of
common stock $0.41 $0.43 $0.75 $0.84
===== ===== ===== =====
Cash dividends declared per
share of common stock $0.13 $0.13 $0.26 $0.25
===== ===== ===== =====
Weighted average shares
outstanding 11,601 12,217 11,613 12,333
========= ========= ========= =========
<FN>
See notes to condensed consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
LAWSON PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Amounts in thousands)
<CAPTION>
For the
Six months ended
June 30,
1996 1995
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<S> <C> <C>
Operating activities:
Net income $ 8,753 $ 10,302
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,942 1,685
Changes in operating assets and liabilities (7,098) (7,811)
Other 1,276 1,091
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Net Cash Provided by Operating Activities 4,873 5,267
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Investing activities:
Additions to property, plant and equipment (1,841) (1,760)
Purchases of marketable securities (239,963) (124,563)
Proceeds from sale of marketable securities 252,279 141,246
Acquisition of Automatic Screw Machine Products,
net of cash acquired (10,506) ---
Other 90 683
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Net Cash Provided by Investing Activities 59 15,606
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Financing activities:
Purchases of common stock (2,095) (19,541)
Dividends paid (3,027) (2,995)
Other --- 5
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Net Cash Used in Financing Activities (5,122) (22,531)
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Decrease in Cash
and Cash Equivalents (190) (1,658)
Cash and Cash Equivalents at Beginning of Period 10,432 9,853
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Cash and Cash Equivalents at End of Period $ 10,242 $ 8,195
========= =========
<FN>
See notes to condensed consolidated financial statements.
/TABLE
<PAGE>
Part I
NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
A) As contemplated by the Securities and Exchange Commission, the
accompanying consolidated financial statements and footnotes have
been condensed and therefore, do not contain all disclosures
required by generally accepted accounting principles. Reference
should be made to the Company's Annual Report to Stockholders for
the year ended December 31, 1995. The Condensed Consolidated
Balance Sheet as of June 30, 1996 and the Condensed Consolidated
Statements of Income for the three and six month periods ended
June 30, 1996 and 1995 and the Condensed Consolidated Statements
of Cash Flows for the six month periods ended June 30, 1996 and
1995 are unaudited. In the opinion of the Company, all adjustments
(consisting only of normal recurring accruals) have been made,
which are necessary to present fairly the results of operations for
the interim periods.
B) Inventories (consisting of primarily finished goods) at June 30, 1996
and cost of goods sold for the six month periods ended June 30, 1996
and 1995 were determined through the use of estimated gross profit rates.
C) On April 30, 1996 the Company purchased substantially all of the
assets and liabilities of Automatic Screw Machine Products Company
(Automatic) for cash of approximately $10,746,000. This transaction
was accounted for as a purchase, accordingly, the accounts and trans
actions of Automatic have been included in the consolidated financial
statements since the date of acquisition.
The following exhibits are attached to Part I:
1. Letter from independent accountants furnished
pursuant to Rule 10.01 (d) of regulation S-X.
2. Letter from independent accountants furnished
pursuant to Item 601, #15 of regulation S-K.
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Part I
Independent Accountant's Review Report
Board of Directors
Lawson Products, Inc.
We have reviewed the accompanying condensed consolidated balance
sheet of Lawson Products, Inc. and subsidiaries as of June 30, 1996
and the related condensed consolidated statements of income for the
three month and six month periods ended June 30, 1996 and 1995 and
the condensed consolidated statements of cash flows for the six month
periods ended June 30, 1996 and 1995. These financial statements are
the responsibility of the Company's management.
We conducted our review in accordance with standards established by
the American Institute of Certified Public Accountants. A review of
interim financial information consists principally of applying analytical
procedures to financial data, and making inquiries of persons
responsible for financial and accounting matters. It is substantially less
in scope than an audit in accordance with generally accepted auditing
standards, which will be performed for the full year with the objective
of expressing an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications
that should be made to the accompanying condensed consolidated
financial statements referred to above for them to be in conformity with
generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of Lawson Products,
Inc. as of December 31, 1995, and the related consolidated statements
of income, changes in stockholders' equity and cash flows for the year
then ended, not presented herein, and in our report dated February 26,
1996, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of December
31, 1995, is fairly stated, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
ERNST & YOUNG LLP
July 19, 1996
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Part I
July 19, 1996
Board of Directors
Lawson Products, Inc.
We are aware of the incorporation by reference in the Registration
Statement (Form S-8 No. 33-17912 dated November 4, 1987) of
Lawson Products, Inc. of our report dated July 19, 1996 relating to the
unaudited condensed consolidated interim financial statements of
Lawson Products, Inc. which are included in its Form 10-Q for the
quarter ended June 30, 1996.
Pursuant to Rule 436(c) of the Securities Act of 1933 our report is not
part of the registration statement prepared or certified by accountants
within the meaning of Section 7 or 11 of the Securities Act of 1933.
ERNST & YOUNG LLP
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Part I
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
Cash flows provided by operations for the six months ended June 30,
1996 decreased slightly to $4,873,000 from $5,267,000 in the similar
period of the prior year. This decline was due primarily to a decrease
in net income, partially offset by an increase in operating assets in the
comparable period of 1995. Current investments and cash flows from
operations are expected to finance the Company's future growth, cash
dividends and capital expenditures. Additions to property, plant and
equipment were $1,841,000 and $1,760,000, respectively, for the six
months ended June 30, 1996 and 1995. Capital expenditures during
1996 reflect primarily purchases of computer related equipment and
facility improvements, while 1995 additions include the completion of a
Lawson outbound facility in Addison, Illinois, at a cost of
approximately of $5,600,000.
During the second quarter of 1996, the Company purchased
substantially all of the assets and liabilities of Automatic Screw
Machine Products Company (Automatic), headquartered in Decatur,
Alabama, at a cost of approximately $10,746,000. Automatic is a
manufacturer and distributor of production components. The new
subsidiary will be known as Assembly Component Systems, Inc (ACS).
In December of 1994, the Board of Directors authorized the purchase
up to 1,000,000 shares of the Company's common stock. During the
first six months of 1996, the Company expended $2,095,000 to acquire
the remaining 86,000 shares authorized for repurchase. These treasury
shares were retired during the first quarter of 1996. In the similar
period of 1995, the Company acquired 741,500 shares at a cost of
$19,541,000. Also, during the second quarter of 1995, the Company
retired 5,235,176 treasury shares, representing purchases through June
30, 1995.
Net sales for the three and six month periods ended June 30, 1996,
increased 13.2% to $63,479,000 and 7.8% to $119,587,000 relative to
the comparable periods of 1995. The advances are principally the
result of gains in the number of orders processed and sales made by
ACS.
Net income for the second quarter declined 10.4% to $4,729,000 ($.41
per share) from $5,277,000 ($.43 per share) for the similar period of
1995. Net income for the six months ended June 30, 1996 decreased
15.0% to $8,753,000 ($.75 per share) from $10,302,000 ($.84 per
share) for the comparable period of 1995. These decreases are attributable to
lower gross margins and a higher effective tax rate,
which more than offset the gains in net sales noted above. Per share
net income for 1996 and 1995 was positively impacted by the
Company's share repurchase program.
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Part II
OTHER INFORMATION
Items 1, 2, 3, and 5 are inapplicable and have been omitted
from this report.
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The annual meeting of stockholders of Lawson
Products, Inc. was held on May 7, 1996.
(b) Not applicable.
(c) Set forth below is the tabulation of the votes on
each nominee for election as a director:
Withheld
For Authority
Ronald B. Port, M.D. 10,006,128 437,616
Robert G. Rettig 9,996,543 447,201
Peter G. Smith 10,002,833 440,911
(d) Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Not applicable.
(b) The registrant was not required to file Form 8-K
for the most recently completed quarter.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
LAWSON PRODUCTS, INC.
(Registrant)
Dated July 23, 1996 /s/ Bernard Kalish
Bernard Kalish
Chairman of the Board
Dated July 23, 1996 /s/ Joseph L. Pawlick
Joseph L. Pawlick
Vice President and Controller
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 10,242
<SECURITIES> 24,375
<RECEIVABLES> 32,011
<ALLOWANCES> 0
<INVENTORY> 37,277
<CURRENT-ASSETS> 96,546
<PP&E> 39,495
<DEPRECIATION> 0
<TOTAL-ASSETS> 166,908
<CURRENT-LIABILITIES> 19,909
<BONDS> 0
<COMMON> 11,601
0
0
<OTHER-SE> 114,753
<TOTAL-LIABILITY-AND-EQUITY> 166,908
<SALES> 119,587
<TOTAL-REVENUES> 120,637
<CGS> 37,430
<TOTAL-COSTS> 37,430
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 511
<INTEREST-EXPENSE> 15
<INCOME-PRETAX> 14,893
<INCOME-TAX> 6,140
<INCOME-CONTINUING> 8,753
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,753
<EPS-PRIMARY> 0.75
<EPS-DILUTED> 0.75
</TABLE>
